Quatro Co. issues bonds dated January 1, 2015, with a par value of $400,000. The bonds€™ annual contract rate is 13%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $409,850.

1. What is the amount of the premium on these bonds at issuance?

2. How much total bond interest expense will be recognized over the life of these bonds?

3. Prepare an amortization table like the one in Exhibit for these bonds; use the straight-line method to amortize the premium.

In exhibit

Semiannual Period-End Unamortized Carrying Premium Valuet $3,546 2,659 1,772 885 (0) 12/31/2015 (1) 6/30/2016 . . $103,546 02,659 101,772 100,885 100,000 (3) 6/30/2017.... (4) 12/31/2017... During the bond life, carrying value is adjusted to par and the amortized premium to zero. Total bond premium (of S3,546) less accumulated periodic amortization (SB87 per semiannual interest period) Bond par value (of $100,000) plus unamortized premium. Adjusted for rounding $104,000 Carrying value $100,0005- $96,000